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Legal Opinion Summary
Topic:Incidental Authority/Excess Capacity: May an association process ineligible residential mortgage applications on behalf of non-Farm Credit System secondary market lenders?
ID Number:04-01
Issue Date:04/06/2004

An agricultural credit association that has excess capacity in its residential secondary market unit asked whether the Farm Credit Act and FCA regulations permit it to process ineligible residential mortgage applications on behalf of non-Farm Credit System secondary market lenders. The facts and circumstances in this inquiry are substantially similar to those discussed in OGC Legal Opinion Summary No. 03-04, issued July 31, 2003. We similarly concluded in this case that the association has incidental authority to utilize its good-faith excess capacity to process such applications. If circumstances change and the association finds that it could feasibly reduce its number of employees, it would no longer maintain its excess capacity in good faith and would no longer be authorized to accept loan applications on behalf of non-FCS lenders under its incidental authority. Other FCS institutions that are similarly situated may perform similar loan application services. Because such issues are fact-specific, we expect institutions to consult with us before proceeding.